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As we are now full swing into the Recession, this is an interesting time to look around us at the progress of competitors and potential partners in the accounting software industry. Accounting , CRM and web sites are bed partners in the SME user's arsenal - Open Source projects are real players in these sectors. We compete head on with some of the biggest software companies in the world. And from recent announcements , it is clear that all is not well in the commercial-proprietary model.

The rationale behind most commercial-proprietary software products is that they are owned by public investors, who then create and manage technology at risk, that they rent or sell to users hopefully at a price that benefits the users and is provided at prices that still leaves the investors with the cash returns that they crave. In theory a win-win situation. In practice, far from it.

Both Open Source and Proprietary vendors all claim to have the easiest to use software and to have the best interest of small business in mind. Open Source projects tend to be run and managed by companies with less than 25 employees. We sell to companies our own size. Our accounting competitors tout a “deep understanding” of our small company needs. Presumably our needs are so trivial as to be easily assimilated, because this advice cannot come from common experience. Its a strange pledge indeed, a company with a Billion dollar turnover offering “from the heart” advice to mom and pop business. Fixed monthly paid call centre operators give us advice on how to meet the storm that awaits us each morning in the SME business world. We seem worlds apart.

Inside the large companies, a battle rages between the shareholders (mostly institutions,with less than 10% ownershipeach of the software company), thousands of disenfranchised employees and millions of cash strapped users (mostly companies of less than 25 users). Directors are split between their avowed company mission “To help small business” and satisfying their dividend hungry shareholders, who have a totally different agenda, based mostly around helping themselves. Users are organised into databases and pencilled into budget forecasts and presentations. Employees are hired or fired according to numbers on a financial report. Pink slips can arrive in the hundreds. To SME users, who have long given up the security of guaranteed revenue, it is in fact only once an employee is retrenched from a large software company that they truly enter the world that we live in, but strangely it is then us that is better equiped to give them advice.

From the Sage web site:

The trend is already in favor of the Open Source companies, as rising costs and dropping revenues make it harder for commercial managers to balance their monthly books.

The Accounting market is driven by Intuit (5 M users), Sage (6M users) , MYOB 700 000 users and TurboCASH (100 000 users). Hundreds of smaller companies make up the balance of suppliers. In the accounting market TurboCASH is the only mainstream Open Source player. Significant changes have happened in this market. In 2008 Intuit retrenched 7% of its works force and recently, Cost cutting Sage to axe 1,000 jobs . In January 2009 MYOB was delisted.

All this bodes well for the Open Source Accounting industry. Open source projects are doing remarkably well through this period. As TurboCASH is still a bit player, we cannot make market prices, but can only follow. In the Accounting software market, typically the larger companies make around $ 400 plus per user per year, or so they report. TurboCASH with its open source model comes in at Free for single user and $ 100 for multi user, so we certainly are able to deliver an appealing offer to the cash strapped SME user market.

From the Sage web site:  

The picture is similar in the CRM market, where both SAGE and Intuit have CRM offering of their own. There is also a large player in Salesforce which has 1.5 Million users. In the CRM business, licences are sold on a per “user basis” and the going price is around $50 per year per user. Open Source products are Sugar CRM and VTiger. VTiger runs a free model similar to TurboCASH and Sugar runs a Commercial Open Source model with paying users. Sugar CRM reduces prices across the board, looking for broad adoption

What makes this market interesting is that it seems to have topped out. The major accounting players all make much of the fact that their revenues come from “Captive Clients”. The idea is that once a customer is on your system, they wont leave even if you drop you service levels by laying off 10% of your workforce. While the proprietary companies are reporting new customer growth of around 3%., Open Source projects are reporting user growth of around 40%. It would seem sadly for stock market investors, that most of the new suers for Open Source projects are coming from established market players.